Depreciation is the reduction in value of your car caused by everyday wear & tear and even just the passing of time. It's one of the biggest costs car owners face.
Buy a new car, and depreciation is at its worst. The moment a car isn't brand new anymore, thousands can be wiped off its value. Even 'nearly new' cars can lose thousands over a few years ownership. So how can depreciation be minimised, or even avoided altogether?
New cars lose the biggest amounts of their value within their first three years - often over half their purchase price. So if buying a new car, selling it on within this time can help stem these most serious losses.
How
long the waiting list is for your new car will also give a clue to what its depreciation
will be like. A long waiting list means big demand but not many being produced,
so used values are likely to hold up well.
Depreciation rates are also
affected by whether the model of car you want to buy is about to be replaced.
Values of a replaced model are likely to take an extra hit in the future for being
an 'old style'. Values of a completely new or
re-designed model that will
remain current for some years ahead are likely to hold up better.
Also
consider the maker's marketing activity. A car's future value will likely be hit
if it's being heavily discounted when new. And to dodge a really big hit, avoid
unusually styled cars or lurid colours.
New
or used, some makes of car keep their value better than others. Though
best performers vary as model styles and marketing strategies change, in general
the slowest to depreciate are prestige makes like BMW, Audi and Mercedes - because
they are judged to stand up better to wear & tear. More recently, new Jaguars
like the new XK have joined the list of slow depreciators.
This makes
a basic model of one of these brands a far more sensible purchase than a high
spec model of a lower-priced brand. For
example, a Mondeo 2.0 Titanium and Audi A4 1.8 SE have a similar new price of
around £21,000. Yet after three years typical ownership the Audi will be
worth nearly £3,000 more than the Ford.
Among smaller cars, models from Honda (Jazz, Civic, Accord), VW (Polo, Golf, Passat) and Toyota (Yaris, Avensis) are typically strong performers at holding their value after three years.
To
get an idea of roughly how much your chosen car is going to be worth when you
come to trade it in, check out the advert or forecourt prices for cars a few years
older than the age of car you're thinking of buying. Or use price guides like
Parkers or What
Car, selecting your make and model but one registered a few years earlier.
The
way to minimise depreciation even further is to buy a used car that has depreciated
almost to nothing already. These days that's not necessarily an old banger.
Cars over 8 years old can be worth next to nothing yet still be a reasonable buy
if they've been looked after.
But to stick two fingers up to cash-sapping depreciation altogether - buy a classic car. It doesn't have to be something exotic. A good old Triumph, Morris Minor, Rover or even Ford can be cheap to maintain, will be reliable if looked after properly, and even be a bit of fun. Many classics have excellent clubs and suppliers for any parts you'll need. What's more, it might also be road tax-free and even actually increase in value! Perhaps an ideal second car?
